Dollar for dollar, a good used vehicle is a better value than a new vehicle. Even if you get a good price on a new vehicle, it will lose 20% to 40% of its value the day you drive it off the lot. If a new vehicle is 'totaled' soon after purchase, most buyers are shocked to find out that their insurance company looks in the 'used car guide' to settle the claim. In most circumstances, the buyer gets only 60 cents to 80 cents on the dollar.
So, how can you feel confident when buying a used vehicle? Where do you go and who do you trust? Start by calling or visiting the credit union and getting pre-approved for a used vehicle loan. It helps to know how much of a payment you can afford and to know that financing is taken care of before you start shopping. If you have a make, model and year in mind, the credit union can book the value of the vehicle for you.
- Shop for cars with an NADA loan value about $800 under your Available Cash figure.
Don't worry about the car's asking price. That's what the dealer dreams you'll pay.
Incidentally, the reason you're looking for cars $800 under your Available Cash figure is to leave room in your budget for dealer profit, taxes, and the like.
And don't worry about where you shop, either. The source really doesn't matter. When you buy a used car, where you shop isn't nearly as important as how carefully you shop. Look in the newspaper. Look on used car and new car lots.
- Get the vehicle inspected by your mechanic before you set the price.
Take the car to a mechanic of your choice. If the seller won't let you have a vehicle inspected, don't buy the car.
Auto service centers, such as tire dealers or department store auto service facilities, are good for pre-purchase inspections as are independent diagnostic services that do not make repairs. Also search used-vehicle inspection services on the Web for inspection services in your area.
Ask your mechanic to check the car carefully and tell you how much he'll want to put the car in good running order—not to make it like new. Taking a car to a mechanic is the most important step you must take. Don't buy a used car if you don't do this. - Use estimated repair costs to negotiate a better price.
Budget the repair costs and use them as bargaining chips. If your Available Cash figure is $5,000, and a mechanic says you need to spend $1,000 on repairs, you can't spend more than $4,000 on that particular car. Don't be shy in telling the seller that.
Don't negotiate from the asking price.
Start bargaining up from loan value (or less), a figure your credit union will give you or you can use a third-party, commerical, online price guide such as nadaguides.com. You should be aware however, the free pricing guides found on the internet are not professional guides. The valuations will be higher using free services.